NEW YORK (Reuters) - A handful of energy firms are rushing their rigs to several counties in southern Oklahoma, convinced they’ve found the next shale play to expand America’s oil boom.
While the number of rigs is leveling off in places like the North Dakota Bakken, oil drilling by companies including Continental Resources and Marathon Oil is quickening in what is known as the South Central Oklahoma Oil Province, or SCOOP, analysts and officials say.
Continental, known for being one of the first wildcatters to spot the commercial opportunities in the now huge Bakken formation, calls SCOOP a “world class resource,” and estimates it could contain 70 billion barrels of oil.
By comparison, Continental estimates North Dakota’s Bakken shale oil play contains 24 billion barrels of recoverable oil.
Although some experts are waiting for more data before declaring SCOOP a major find, it is creating a quiet buzz amid growing evidence of heightened activity.
“We consider SCOOP one of the top emerging plays in the U.S,” said Andrew Byrne, director of energy equity research at IHS in Boston, Massachusetts.
Oil rigs in Oklahoma jumped 17 last week to 155, according to Baker Hughes, the biggest one-week increase in three years. It is nearing the oil rig count in boom state North Dakota, which stands at 168 and is largely unmoved in recent months.
Although the data does not specify whether the rigs are in SCOOP or in one of several other Oklahoma fields, or whether they are drilling traditional vertical wells or shale-related horizontal ones, the focus for many firms is clear.
Continental plans to boost the number of rigs in SCOOP from 12 to 18 this year, and will spend $900 million dollars of its $4 billion budget there, a spokeswoman said.
Marathon did not comment beyond the information provided to analysts last month, and another prominent driller, Newfield Exploration Company, did not respond to requests for comment. Both companies are expected to shed more light on their plans during quarterly earnings in the coming weeks.
SCOOP is helping revive oil production in Oklahoma, one of America’s oldest oil patches.
Most shale drilling in the state has yielded natural gas. But oil output has risen by over 100,000 barrels per day (bpd) over the past two years, reaching a near 25-year high of 323,000 bpd in October, according to U.S. government data. Over a quarter of that is thanks to SCOOP, company data show.
Part of the Woodford Shale formation, SCOOP is a southern extension of the Cana play, a belt several miles wide containing wet gas, according to Rick Andrews, a geologist with the Oklahoma Geological Survey at the Oklahoma University.
Continental and Newfield first started exploring SCOOP in 2012, but output only began ramping up last year. Since then, others have joined. Marathon Oil Group expanded its play in Cana south to invest sizeable resources in SCOOP, the company told analysts in a December presentation.
Continental’s founder and Chief Executive Officer Harold Hamm called SCOOP the company’s “stealth play,” according to President and Chief Operating Officer Rick Bott.
“We invested and saw some oil results, so we leased large, large, large footprints,” said Bott. “We secured the lion’s share of the acreage in what we think is this play.”
Matt Portillo, managing director of equity and research for Tudor, Pickering, Holt & Co, said activity has materially increased in SCOOP in the last six months and that he expects Newfield to double its rig count this year.
Early excitement in a shale formation does not necessarily spell success.
Companies flocked to the Collingwood shale in Michigan in 2010 in a giant collective land grab, only for wells to disappoint. The Utica shale in Ohio, initially touted as a major oil find when drilling began in 2011, is now proven to be filled with less lucrative natural gas.
Portillo sees SCOOP maxing out at about 100,000 bpd in 2018, around three times what it pumps now -- versus nearly 1 million bpd from the Bakken or the Eagle Ford in Texas.
“The oil is fairly immaterial in terms of the production numbers,” Portillo said of current SCOOP output compared with other plays.
Continental has been outspoken about SCOOP. Its wells produced 20,070 barrels of oil equivalent per day in the third quarter 2013, a nearly 300 percent increase year-on-year, according to securities filings.
Moreover, the location of SCOOP, not far from existing pipelines and a major storage hub in Cushing, could eliminate problems experienced in other more remote drilling areas that have relied on trains and barges to bring product to market.
Analysts, meanwhile, maintain that there is potential.
“Geologically it has three hydrocarbon windows similar to the Eagle Ford,” said Byrne at IHS in Boston. “That means it’s got an oil window and an oil content that companies want to target. The actual size of the potential is not defined yet, but it all looks really positive.”
Reporting By Elizabeth Dilts; Editing by Edward McAllister and Andrew Hay